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August 2008
Internet & Mobile Association of India (IAMAI), 2008All rights reserved. No part of this report may be reproduced, either in part or in full, without the prior permission of Internet & Mobile Association of India
Table of Content
Executive Summary................................................................................................................................. 1 1.0 The Indian Mobile Telephony Market An Overview ................................................................ 3 2.0 Need for MVAS .................................................................................................................................. 8 3.0 Mapping Mobile Value Added Services....................................................................................... 10 3.1 Defining VAS................................................................................................................................ 10 3.2 Understanding Different MVAS categories ............................................................................. 11 3.3 Perceived & Practical value of various categories of MVAS ................................................. 13 3.3.1 Perceived & Practical value of Entertainment VAS ............................................................. 13 3.3.2 Perceived & Practical value of Info VAS ............................................................................... 14 3.3.3 Perceived & Practical value of Mcommerce.......................................................................... 14 3.4 Pillars of MVAS ............................................................................................................................ 14 3.5 Mobile VAS in rural market ....................................................................................................... 15 4.0 Understanding MVAS Ecosystem ................................................................................................. 17 4.1 Understanding the role of various entities............................................................................... 17 4.2 Role overlapping .......................................................................................................................... 18 4.3 Revenue distribution ................................................................................................................... 19 4.4 The key factors playing role in revenue distribution ............................................................. 20 4.5 Comparative analysis of roles and challenges of various stakeholders .............................. 21 5.0 Mobile VAS access modes .............................................................................................................. 22 6.0 Mobile VAS access devices ............................................................................................................. 25 7.0 3G and its impact in Indian MVAS market.................................................................................. 27 7.1 Defining 3G................................................................................................................................... 27 7.2 Analyzing strengths and weaknesses of 3G............................................................................. 27 7.3 Impact of 3G.................................................................................................................................. 27 8.0 Drivers to the growth of MVAS market in India ........................................................................ 28 9.0 Barriers to the growth of MVAS in India ..................................................................................... 30 10.0 New services in the MVAS market ............................................................................................. 32 11.0 Mobile VAS market in India......................................................................................................... 36 12.0 Future of Mobile VAS in India..................................................................................................... 38
Executive Summary
Need for the study Over the last 5 years, the telecom industry has realised the importance of MVAS. Given the declining ARPU and increasing competition among operators it is imperative to focus on alternate revenue streams. That is where there is a felt need for capitalizing on the Value Added Services Market. Today the various MVAS entities are still struggling with issues such as the correct definition of MVAS, the roles and responsibilities of each entity in the value chain, revenue sharing arrangements between them and other critical issues such as regulation of the MVAS market. This report presents these key issues in detail and provides a neutral perspective to the industry. It provides a clear and precise definition of MVAS, its various categories existing in India, the MVAS still evolving and thus changing ecosystem along with the current revenue sharing scheme between various entities, its drivers and barriers along with its future in India. Methodology The research team at eTechnology Group@IMRB conducted the research through 2 key modules- Primary research and extensive Desk research. Primary Research was conducted using in-depth interviews across a cross-section of stakeholders. These included telecom operators, content aggregators, content owners and technology enablers. The interviews were content analyzed in detail from different perspectives. Extensive desk research was done to build an in-depth understanding of the Mobile VAS market in India. Detailed analysis of secondary information was used to arrive at the specific frameworks provided in the report. Information from various published resources such as TRAI, COAI, etc and other research bodies were also used to validate the market figures and cross-validate the data.
Key Findings The Current Mobile VAS industry is estimated at Rs. 5780 crore by end June 2008 and is estimated to grow steadily at 70% over the next two years to touch Rs. 9760 crores by end June 2009 and Rs.16520 crores by end June 2010. The current MVAS market contribution of each of the above services is given belowVAS Revenue contribution- by Services- Jun 2008
Games 5% Others 2%
P2A/A2P S MS 16%
CRBT/RT 40%
P2P S MS 37%
The current MVAS market (as of June 2008) is Rs 5780 crores. P2P SMS contributes Rs 2140 crores to the MVAS market and this goes only to the operators (the balance Rs 3640 crores is divided between the different stakeholders including the operators.). Rs 2312 crores come from CRBT/RT while the balance Rs 1329 crores is divided amongst the other services.
16520
Jun 2009E
Jun 2010E
MVAS currently contributes around 9 % to the operators revenue. It is expected to increase to 10.4 % in the next 1 year and 12% by June 2010. The Road Ahead In the age of convergence, the prominent growth driver of MVAS would be the consumers desire of getting more from their mobile phone. While among the youth entertainment related services would be popular, the other consumers would also look for utility based services like location information, mobile commerce (M-Commerce) for mobile transactions and Local content rich services. Mobile VAS industry in India is undergoing a lot of structural changes and is poised to grow and contribute greater revenues to the telecom industry in years to come.
286.86
QE-Mar-04
QE-Mar-05
QE-Mar-06
QE-Mar-07
QE-Mar-08
QE-Jun-08
E 2010
With increasing competition and the need for increasing the subscriber base in rural markets, the call rates are declining. This has led to decrease in ARPU.
Average Revenue Per User
Average Revenue Per User In INR 400 350 300 250 200 150 100 Mar'06 Jun'06 Sep'06 Dec'06 Mar'07 Jun'07 Sep'07 Dec'07 Mar'08 256 228 215 196 202 206 173 176 159 366 GSM 316 298 297 275 CDMA
352
337
261
264
Therefore, in spite of unprecedented growth in the mobile subscriber base, the operator margins are declining quarter on quarter with a very marginal increase in Mar 08. Though the Minutes of Usage is increasing however the same is being offset by the lowering tariffs of operators. This could be attributed to the major subscription growth that is coming from bottom of the pyramid.
414
425
454
471
476
462
464
493
Jun '06
Sep '06
Dec '06
Sep' 07
Dec '07
Mar '07
8%
92%
Post Paid
Pre Paid
From launching low-cost handsets to bringing down the tariffs and organizing street plays to advertise, the real battle among telecom competitors is now being fought in the rural hinterland. It is believed that of the next 250 million people expected to go mobile; at least 100 million will come from rural areas. Though the rural mobile penetration is highest in Punjab (20.69 per cent), followed by Himachal Pradesh (17.09 per cent), Kerala (10.63 per cent) and Haryana (10.20 per cent), most companies are now sweating it out by hard selling their products and services in the rural areas of the region. As a result, the geographical coverage of mobile telephony in India has gone up from 13 percent, a couple of years ago, to 39 percent now.
Subscription Contribution
Population Contribution
15 -20%
80-85%
Urban India
72%
Rural India
28%
Mobility and Connectivity The growing need of high mobility and staying connected is the prime driver for the entire category. This is true for people from different age groups and occupation. The youth segment that comprises 30% of the total handsets market requires high mobility and connectivity and the same is true for business and other
professionals. This innate need coupled with availability of handsets and connectivity at affordable price points has triggered the growth of telecom in India. 1.2.2 Push Factors Investments in Telecom Industry The telecom industry has seen an estimated $8.5 bn in investment flow during 2006-07 alone, of which $550 million was in the form of foreign direct investment. All major telecom handsets manufacturers - including Nokia, Samsung, Motorola and LG - have their presence in India, along with the leading global service companies and infrastructure majors, such as Vodafone, Singapore Telecom, AT&T, Ericsson, Alcatel and Siemens. This has triggered the growth of Telecom Sector in India. Gradual Progression in Telecom Sector The progression chart below depicts the major regulations and events driving the extra ordinary growth of Telecom sector from year 1999 to 2008.
Getting Paid for Receiving Incoming Calls
2008
2004
2003
2002
Launch of GSM service by BSNL And 4th GSM operator, Charges for incoming
1999
In order to capitalize this opportunity of meeting the consumer needs in highly competitive market the operators have reduced the tariffs to attract consumers with low purchasing power primarily in semi urban and rural India. In fact lucrative offers like being paid for incoming calls have transformed the scenario completely. Through these changing regulations and events, the Industry players are aiming to achieve the following Acquiring new subscribers by expanding in Semi Urban and Rural India Selling more services to existing subscribers
The recent TRAI recommendation permitting PC-to-phone calls where ISPs can offer cheaper STD calls and even free local calls. This would result in further reduction of voice tariffs. This would lead to increased focus on MVAS by mobile operators.
Acquiring New Subscribers through expansion in Rural India Acquiring customers have always been a great challenge for companies. Given the current level of saturation in Metros and Urban Market and cut throat competition among operators , increasing subscriber base in urban market would be all the more challenging. Therefore a lot of operators with adequate support from Government are eyeing the rural market for future growth. Big operators like Airtel have claimed that soon mobile connections and recharge vouchers etc will be available at all such places from where people buy match boxes. This certainly explains the future penetration of these services in remotest of villages. Selling More to Existing Subscribers This is relatively easier as compared to acquiring new customers. Also since now the new subscriptions will largely happen at the bottom of the pyramid therefore the new subscriptions will further lower the average revenue per user. In such a scenario mobile VAS sector is a potential long-term revenue stream as it will be easier to sell more to the existing customers. Government Initiatives Government also has supported the growth of this sector by coming out with a number of initiatives for the low end subscribers of rural India, and Universal Service Obligation (USO) fund was one such initiatives. The USO fund was an initiative taken up by the government to increase rural teledensity. In recent developments, BSNL and two private operators will erect 427 towers in remote areas offering over four lakh mobile connections. All the towers are expected to be erected and commissioned by December 2008. Under the second phase, DoT aims at erecting 11,000 towers throughout the country to offer over 11 million mobile connections ADC was levied by Telecom Regulatory Authority of India (TRAI) in 2003 to provide support for BSNL's rural telephone obligation. Telecom Regulatory Authority of India (TRAI) has recently given orders for the withdrawal of the ADC (Access Deficit Charge) and the subsequent passing of the benefit to the consumers by the telecom operators.
Country
USA UK France Brazil India
Tariff charges
Rs 13/min Rs 7-8/min Rs 7-8/min Rs 6/min Re 1/min
o
o 3G bidders who are non operators: The arrival of new technologies will give rise to greater competition as many non operators are also bidding for the 3G licenses. Department of Telecom has planned to allow five 3G operators in each circle depending on the availability of spectrum.
Therefore there would be a greater need to differentiate one self in order to attract new customers and retain the existing ones. o Saturation in Metro and Urban Market: The metro/urban areas offer high level of penetration and have significant mobile subscribers. In such a highly saturated market with the entry of MVNOs the competition will get fierce. Therefore capitalizing on value added services will give operators opportunity to increase ARPU by providing premium services.
Metro Circle
Delhi
Mumbai
Mobile Penetration
90%
70%
Chennai
Kolkata
89%
47%
Punjab
46%
Increasing need and demand from consumers: In addition to the above supply side reasons the pull effect from consumers asking for more than just basic telephony is also a key driver for MVAS services. Today most of the consumers are seeking more from their communication device apart from just mobility and desire to stay connected.
As we have seen, Telecommunication has moved beyond providing just basic voice calls. The mobile phone has evolved from a mere communication device to an access mode with an ability to tap a plethora of information and services available in the ecosystem. This is the reason why it is now being referred to as the fourth screen, after Cinema halls, Television and PC.
The above definition supports a free market but can be broadened to incorporate new service categories and players in the supply chain. For mobile telecommunication market, a simple definition of VAS would be-
Mobile Value Added Services are those services that are not part of the basic voice offer and are availed separately by the end user. They are used as a tool for differentiation and allow mobile operators to develop another stream of revenue
Entertainment VAS - The key differentiating factor of Entertainment VAS is the mass appeal it
generates. These provide entertainment for leisure time usage. These not only generate heavy volume (owing to its mass appeal) but also heavy usage. An example of these kinds of services is Jokes, Bollywood Ringtones, CRBT (Caller Ring Back Tone) and games. These services continue to be popular and have been key revenue generators for the Indian mobile VAS market. This is a high value MVAS and will continue to show growth. Other popular Entertainment VAS driving the market are dating and chatting services. The service was first introduced 2 years back and is now being offered by all the operators. Each circle generates about Rs 30 lakhs per month. This service is not only growing fast but also witnessing less churn as compared to other MVAS. Owing to its sticky nature, it requires comparatively less marketing efforts and cost. Entertainment VAS has the potential to remain a key contributor to Mobile VAS industry. To sustain the MVAS growth, it is the responsibility of the industry to keep discovering/innovating killer applications like CRBT (Caller Ring Back Tone) at regular intervals
Info VAS- These services are characterized by the useful information it provides to the end user. The
user interest comes in from the personal component and relevance of the content. Apart from mobile, alternate modes are available to access Information VAS like Newspaper, TV, and Internet. E.g. of Info VAS is information on movie tickets, news, banking account etc. They also include user request for information on other product categories like real-estate, education, stock updates, etc. Information VAS needs to target the right person at the right time with the right content.
These are the services which involve some transaction using the mobile phone. An example of this kind of service is buying movie tickets using mobile phone or transfer of money from one bank account to the other. These can broadly be classified into 2 types - Mobile banking and Mobile payments.
Though in a nascent stage, off late many initiative have been taken in mCommerce space. A number of application providers are in the market with different business models. Some are focusing on mpayment, some on incorporating mCommerce into it while others on mbanking aspects. This year has seen the launch of mbanking service by Indians largest private sector bank which has given mbanking a much needed thrust. Almost all the Use of mCommerce operators are conducting pilot exercises for mCommerce services using depends on the vendor different access modes like GPRS, USSD, STK, etc. A big boost to which operator have tied mcommerce has come from the RBI which recently came out with some guidelines. up. lets say an mCommerce penetration continues to be small but awareness is operator has tied up with increasing. Operators are betting on technologies like USSD to make a payment technology the service handset agnostic.
provider which has back end tie ups with various banks but if it is not SBI or ICICI, it is a useless service- Operator
The current marketing focus is primarily on mobile bill payment and mbanking. Industry is betting on tripling number of mCommerce users within this year. This is discussed in greater detail in the subsequent sections.
The revenue generation and popularity of any MVAS revolves around 2 factors: Entertainment VAS
These services provide Entertainment for leisure time. These services usually generate mass appeal Entertainment VAS is driving the VAS market both in terms of volume and revenue. Industry focus is on Entertainment VAS with new players coming from media and movie houses e.g. STAR, Rajshri
Information VAS
These are the services which provide some useful information to the end user. The user interest comes from personal or relevant component of the content. Information VAS is getting popular with different categories depending on the relevance Entities using mobile as another channel to deliver information is driving information VAS. E.g. stock updates, bank account information, travel information, etc. Marketing is the biggest challenge since Information need differs across different segments Credibility of the source is another challenge since there are alternate channels available to get Information VAS Information VAS is going to be key to address the needs of growing rural market
mCommerce
These are the services which involve some transaction non mobile
Definition
Current status
currently
in
Drivers
RBI guidelines is expected to give a big boost to mBanking Identifying the best access mode to provide mCommerce is a big challenge Handset penetration and usage of the key access mode (GPRS) of mCommerce is low in India Allaying security concerns mCommerce has the potential to emerge as a key VAS component once security concerns are addressed
Challenges
Currently, music is the biggest component. Challenge is to drive the usage of other content/services like games
Future status
Entertainment VAS is expected to remain the VAS driver for the next few years
Perceived Value - Perceived value of a MVAS depends on perceived rather than the actual utility to the end user. When the immediate benefit may not be clear to the subscriber, the value that a subscriber derives from it largely depends on the marketing efforts and persona related to the service. The value is gauged more from the intangible benefits derived from the service like emotional benefits. A good example of a MVAS with high perceived value is CRBT (Caller Ring Back Tone). Practical Value - Practical value is completely based on tangible benefits derived from the service. The benefits considered could be based on convenience, time or money. E.g. Service availed to get the cheapest air fares available, money transfer using mobile These above three categories of MVAS provide a unique combination of perceived and practical values for every user and this may change over time as the market & users evolve. To understand the growth of the different types of MVAS and their future growth, they have been analyzed on both the above mentioned factors.
Entertainment
Infotainment Entertainment
Perceived Value
Infotainment
Perceived Value
mCommerce
mCommerce
Technology
Access Devices
Infrastructure
Content
3.4.2 Content
Is content really the king? It does not seem so, looking at the percentage revenue share collected by Content aggregators and Content owners of the total MVAS pie. Add to it the pirated content and side loading in the India market; it does not present a rosy picture. The content depends a lot on geography and is not transportable across borders. Both IPR (e.g. music label) and white label content (e.g. cricket) is available in the market. But on the other hand, much of the content being consumed is being generated for other media. But because of the same reason we say a wide variety of content being available especially in the Entertainment category. For content aggregators/developers/owners to play a significant role in the category, relevant content needs to be generated. They need to play a larger role from merely being a content aggregator and transporter. Investment needs to be made keeping in mind the long term benefit and not the short term ROI. Another factor which impedes the content development is marketing of MVAS. A lot of content and services die prematurely or do not realize their full potential because of lack of sufficient and focused marketing efforts. Currently, packaging and marketing of content is primarily in the hand of operators. The stakeholders are currently not sharing the burden again citing reasons of lack of sufficient returns.
Regionalized content has already been success we ourselves are running a regionalized Marathi portal which gives us very high revenuesContent Aggregator
Regional content will give a boost to the MVAS market. It has tasted success in the Indian market but the challenge is to generate relevant content not only catering to regional differences but also in different languages.
3.4.3 Infrastructure
Infrastructure requirement needs to be met to harness the potential of different technologies. Setting up infrastructure especially in the rural areas is going to play a major role in the growth of MVAS.
3.4.4 Technology
There are 2 aspects to technology. One is the technology platform itself and the second is the communication technology. On one hand technology platforms are independent of geography and are transportable across borders unlike content which needs to have a regional flavor for e.g. mobile payment platform, IVR, etc. Though there are challenges in case of platforms like speech recognition given the high number of languages and dialects spoken in India. Communication technology is also independent of geography but depends on regulation issues for e.g. 3G
Apart from the identification of rural consumer needs and development of relevant content, communication of these services to the rural population would be a bigger challenge. One way to do this is to communicate through regional SMS for which a separate SMS gateway needs to be installed. Literacy level of the geographical area will be another limitation. Therefore the better communication option is Voice in regional languages. The challenge with regional voice is not only investment but also blockage of the already scarce spectrum. Marketing the content in rural market is going to be all the more challenging. This would require right packaging and pricing of MVAS. Providing cheap access mode to end consumer would be another key booster to rural MVAS. Current voice MVAS charges are expensive from a rural consumer perspective therefore that also would need to be addressed for e.g. the sachet model could prove to be successful here. MVAS is going to address two main needs of rural consumers- connectivity and entertainment mode. Connectivity will provide Information VAS on Agriculture necessary for the farmers livelihood e.g. mandi rates, weather, etc. Health, finance, job opportunities etc are potential areas. Mobile also has the potential to evolve as a key entertainment mode considering lack of other entertainment options in rural areas. The industry has witnessed some type of content being downloaded more in small towns of UP and Bihar rather than in metros like Delhi and Mumbai. Therefore by leveraging on these two aspects MVAS can be a success in rural area.
MVAS Ecosystem
Operator Consumer
Handset manufacturer
Content Owner
Content Aggregator
They mostly provide content to Content Aggregators but also some times interact directly with the operators. In recent cases, Content owners sell the content directly to handset manufacturers for e.g. Nokia tied up with Om Shanti Om providing exclusive songs, wallpapers, games, etc. Traditional Media Companies Media companies like TV channels and FM channels have also joined the bandwagon. All the big TV channels have started selling their content through short codes. STAR has even launched a mobile division named STAR Mobile Entertainment to provide mobisodes and mobile related content. The key revenue source for the media channels is Voting in shows like Indian Idol and contest participation in shows like Paanchvi Paas. Post the success of talent hunt shows and contests like KBC, the TV slots have been flooded with such shows and other reality shows. Though the initial euphoria has not sustained, voting and contest participation continue to contribute significantly. Technology Enablers Technology partner & platform enablers handle software platforms and authoring tools. Thus they provide the backbone to all the MVAS being provided. The technology backend include solutions like Televoting system, Voice portal, etc. Short Code Providers These are the companies who own a short code (e.g. 58888, 53456 etc) which is sold to a third party client for some keyword and a specific period. On one hand they need to tie up with the operators to ensure their short code works across subscriber base and on the other hand they sell their short code to other companies like real estate, hospitals, etc. who advertise their products using the short code. Handset manufacturer The handset manufacturers have joined the bandwagon and have started tying up with Content owners to provide pre loaded content on their handsets. Content converter Since most of the content in MVAS is originally designed for some other media, it needs to be converted into mobile compatible format. This is where content converters enter the value chain. They interact with the operators and work closely with them.
A unique model is being followed by Indiatimes 58888 where they package, market and brand the service themselves using operator only as a pipe.
Reconciliation of data between operator and VAS provider is not under control . take revenue sharing out, neither the operators nor the VAS providers have any good authentic data to say what is the number of hits at times it is upto 40% variation in data.data is not effectively available with any of the parties- Technology enabler
Content owner gets 5-10% of the revenue Content Aggregator gets 10-15% of the revenue
In the Indian market the revenue we get is quite lower but it is a good place to try out your services, perfect them and then we take them to other marketsTechnology enabler
Platform
IPR
Negotiating power
Platform: Depending on the access mode used to delver MVAS to consumer and the resultant technology used, revenue share gets distributed. For e.g. when the service is delivered using Voice portal platform, more revenue is released to the technology enabler as compared to when SMS platform is used. IPR: The revenue distribution also differs on the type of content. In case of IPR related content, operators release more revenue while in case of white label content, comparatively less revenue percentage is released.
Mobile Operator
Technology Enabler
Content Aggregator/Developer
Content developers/owners develop content either for mobile or other media Content aggregators aggregate the content from different sources
Key role
Provides backend technology to deliver MVAS for e.g. voice portal platform
Additional role
Witnessing huge MVAS potential, some of the operators have ventured into the domain of Technology enablers. E.g. Bharti Telesoft, Reliance, Spice Operators also undertake the role of marketing the MVAS Their role is indispensable in the value chain as other entities cannot venture into their domain
They not only act as platform providers but also as the middle men between Mobile operators and Content Aggregators/ Media houses. The revenue deals are regulated through them Their role is gradually being diminished with increasing competition and other entities (in the value chain) venturing into their domain especially operators With growing number of operators, the task of aligning with operators across circles would be a big challenge Another challenge is to interact with large number of content aggregators/owners and handle the IPR issues At technology front, the challenge is to address the language needs across regions
Some of the content developers have set up a dedicated content development center
of
Their role is vital both in Entertainment as well as Information VAS The role gets diluted in case of white label content and also because of piracy and side loading The challenge is to meet ever changing needs and tastes of the end consumer Generation of relevant regional content is another big challenge which is going to mount with penetration in rural areas. Content owner and aggregator receive low revenue share in the existing ecosystem
Challenges
The biggest challenge is understanding the needs and requirements of the end consumer Another key challenge is marketing the different categories of MVAS
Interestingly, since operators are involved with marketing of MVAS, they are also the ones who solely decide the selling price of content/service. Neither content aggregator nor owner has a role to play in it.
Voice Platform
Interactive Voice Response (IVR) system is used to deliver Voice based Value Added services to the consumers. In this system, the end user interacts with a computerised system to tap the service. The end users can select the options available on the service either through numbers on the keypad or using speech recognition system. Voice based services are offered in a variety of languages to cater to the diversified Indian population. This mode becomes more significant when dealing with the non-metros and rural India. Voice access contributes to more than one-third of the total MVAS revenue
GPRS/WAP Platform
GPRS currently contributes around 6-7% of the overall MVAS revenue. The high price of data access acts as a barrier towards usage of GPRS. The primary drivers for the adoption and usage of mobile internet are availability of cheap data-enabled handsets and lowering of GPRS tariff by mobile operators. GPRS is an effective medium of accessing MVAS, but is restricted by relatively lower consumer base.
SMS contributes around 49% to the overall MVAS revenues. This consists of P2P, A2P and P2A services.
Cost to provider
Reach
Handset agnostic - Limited by literacy and language factor - Difficult to remember short code and keywords High brand building and awareness expenditure
Handset agnostic - Limited by literacy and language factor - Convenient to use than SMS
Low penetration and high price of MMS enabled handsets Usage is restricted by low availability
Ease of usage
Easiest to use
Marketing VAS
Building awareness is easier through umbrella advertising by the operators With telecom growth expanding to rural and semirural areas, Voice has huge potential
Potential
India has a diverse and multi-lingual population with a variety of needs. Mobile Value Added Services market is in the growth phase. The industry stakeholders need to ensure that the right mix of content and access mode is made available to the relevant user groups. With the advent of new technologies like 3G and USSD, the contribution of various modes to the overall MVAS revenues is likely to change in the near future. With availability of vernacular content, Voice would gain prominence. Mobile internet access would also get a boost with cheaper data enabled handsets, lower GPRS tariff and better WAP connectivity by telecom operators.
GPRS Enabled - 65 mn
6.2 3G Handsets
The market for 3G in the country is expected to be huge with over 65 million wireless subscribers, who use their handsets to access data services on the Web. These subscribers are currently using mobile handsets which are internet-enabled and are potential broadband subscribers with the deployment of advanced wireless technologies such as 3G.
According to Indian Cellular Association (ICA) about 5% of mobile users already have handsets that can work on 3G spectrum. In addition, out of all those possessing the 3G enabled handsets the number of people who would use 3G services would be determined by the quality of content available. Unlike most other countries, we are looking at 3G services not only as premium services but also as an extension of 2G. Since our broadband penetration is abysmal, 3G would provide a much required boost to it. Given that mobile phones are much cheaper as compared to PCs, the demand for broadband on mobile is expected to be much greater. More importantly, 3G will solve problems more in rural India. Therefore the shift towards 3G would depend on affordability of handsets along with the quality of content available.
Established branded mobile handset players today are actively looking at making headsets part of their package offering to customers. India is a major IT hub and it comes as no surprise that the Indian Bluetooth headset market is expected to grow at a compound annual growth rate (CAGR) of 74% in India vis--vis 48% in China. According to Industry experts, the professional headset market in India is expected to grow at a CAGR of 21% over the next five years, which will be driven by the contact centres and IT enterprise segment through addition of new seats and replacement of handsets by headsets. In the year 2007-08, India shipped close to 85 million mobile handsets, compared to 66 million units shipped in the previous year, registering a year-on-year growth of around 29 per cent. This could be attributed to the huge influx of ultra-low cost Chinese and operator-branded handsets that have sharply brought down the average selling price (ASP) of entry-level handsets and cconsumers need for changing phones as frequently as within 8-12 months. This growth is an outcome of a burgeoning mobile services market and lower entry barriers across various customer categories, as average selling prices of handsets is constantly falling and has gone down to as low as Rs.599 in the wake of a highly competitive landscape with close to 25 vendors. Handsets costing less than Rs 3,000 account for 70% on the market, and nearly half of these cost less than Rs 2, 000. Yet interestingly the average cost of a phone sold in India is Rs5,000. This could be attributed to the growing number of high-end phones being shipped to India. In FY 2008 EDGE and WCDMA-enabled mobile phones contributed 15.4 per cent and 3.1% respectively of the total mobile phone shipments compared to 7.4% and 1.2%, in 2006-07.
3G spectrum offers 4-5 times the voice capacity of 2G spectrum and thus 3G is a costeffective tool to deliver voice In urban India, 3G facilitates faster data/voice connectivity enabling video on demand In rural India, 3G can enable telemedicine, virtual marketplace and e-learning Operators can ensure better quality of service and reduction of network congestion Upgrading from 2.5G and CDMA to 3G is not a tough challenge compared to investing in WiMax 3G technology has wider deployments and is more matured compared to WiMAX and 4G.
7.3 Impact of 3G
Though 3G has created lot of buzz, it is unlikely to have an immediate impact. Currently, there are not many services which are data speed dependent. But a definite impact would be considerably higher speed of Internet access and availability of content for Mobile TV, UGA, etc. A significant spectrum for 3G might go into providing better voice services. Therefore, 3G will not only be used to provide data services but also better quality voice.
Among the promotions carried out by operators, 60-70% would be promotions for VAS be it alerts, jukebox, messenger, search, mcommerce- Operator
The current focus of Mobile operators is on subscription based offerings to promote MVAS usage for e.g. subscription based news alerts, sports update, mRadio, etc.
Increase in User Base: On an average about 8.5 Million mobile subscribers are being added every month and therefore the mobile industry is witnessing an unprecedented growth. With increasing growth rate of low end subscribers Traditional MVAS (P2P and P2A SMS) will have a huge growth potential among the low end mobile subscribers. Price Decline of MVAS services: Looking at the high growth rate of low end mobile subscribers the MVAS services are being offered at attractive prices such as subscription packs of free SMS or news alerts etc. New Technology Adoption By operators: From 3G, new services for premium MVAS consumers will come like video services which use fair amount of bandwidth, (live TV, cricket match). Today because of lack of data speed it just does not work. Impact of 3G: The Ministrys decision to open up the bidding to all player for 3G spectrum, gives a chance to the foreign players like Deutsche Telecom, AT&T and new Indian players such as Unitech and Hindujas to enter the high growth telecoms market. Players who would get 3G spectrum would have an upper hand as relative to other players. Entry of foreign players would encourage the growth of mobile VAS services for additional revenues
Since quality and speed of data transfer increases, and 3G is a more secure medium, mobile banking would get a boost with the advent of 3G Also, foreign players might bring in new technologies for development of MVAS market in India The anticipated high price of 3G services may act as deterrent for mass market penetration. The telcos would have to identify niche segments for 3G services Entry of MVNO: Mobile Virtual Network Operator (MVNO) model has gained popularity in the last few years and there are over 300 MVNOs registered throughout the world. MVNOs operate through commercial arrangements with licensed Mobile Network Operator (MNO) and buy bulk minutes of traffic and resell them to their own subscribers. MVNO is seen as a natural progression towards enhancing free market principles and contributing to the efficient use of existing telecommunication infrastructures. In India, o The TRAIs approval for mobile virtual network operators (MVNOs) has removed a strong entry barrier in the telecom services segment which will enable asset-light companies to set up shop in the worlds fastest growing mobile market Entry of MVNOs would give MVAS a boost, since the players would need to concentrate on it for additional MVAS revenues. It will boost handset sales and also help new service providers, which have recently got license, to utilise their capacity better and enter service circles for which they dont have license. India has the lowest mobile tariffs in the world; which pushes MVNO to concentrate on services itself, which would bring in additional revenues, as the margins in this sector are razor-thin and further reduction of tariffs is not feasible.
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After P2P SMS, MVAS would be driven by music. As far as the technology or product is concerned, currently in voice based services CRBT rules the game. Mcommerce and Transaction based services: In year to come money transfers, driven by lack of banking infrastructure seems to be a key service need. Mcommerce would be a large growth driver in 2-3 years time. With a lot of companies offering bill payment for utility services through mobile will help grow Mcommerce. This will largely come from urban because Mcommerce is related very strongly with bank accounts, credit cards which is largely an urban phenomenon. Local Content : Unfortunately today Local content not available adequately. The content partners currently are not developing content specific to even big metropolitan towns such as Durg or Raipur not to talk about relatively smaller towns. Therefore there is a great need of investing right resources in developing rich content which millions of users will start subscribing.
Demand Perspective
Limited awareness of services: The consumers are not fully aware of the services offered in the MVAS market. The promotional SMS sent on the mobile phones are the primary source of making end consumer aware of value added services. This method of promoting MVAS has now reached the saturation stage. The stakeholders need to ensure that the consumers are educated about the value of the services in the MVAS market. This would ensure more acceptability and usage of services among the users. High cost of content: Currently, the value added services are priced at a higher side. This is hampering growth of MVAS market. The consumers look for value in a service if they are paying for it. Presently, the consumers perceive that MVAS is priced higher than the actual value it is delivering to the consumers. The Indian MVAS market consists primarily of prepaid users, who have relatively lower budget for MVAS in their overall mobile expenditure. The stakeholders need to package the services in a manner that ensures correct mix of money and value to the consumer. Exit barriers for MVAS consumers are high: The service providers dont make the consumers well aware of the process of unsubscribing from any service. The consumers may restrain from using the services in case the exit barriers are too high. The service providers need to ensure that there is a correct mechanism for making the users aware of exiting from the service.
The subscribers are not aware how to deactivate the service it follows the traditional routes like visit the gallery or call up the call centrethere should be method of auto relieval, the service goes auto relieved after 30 days- Operator
Supply Perspective
Transparency in Revenue sharing arrangements: Revenue sharing arrangement in India is one of the biggest hindrances for the growth of MVAS market. The stakeholders are in conflict with each other about the revenue sharing system in India. Presently, telecom operators take majority of the revenue and the other entities get a lower share in the overall revenue. This is hampering the growth of content development in India, and in turn the overall MVAS market.
There is a need for designing a fair revenue structure so that all the stakeholders in the ecosystem get their share of the revenue. This can be achieved by aligning the revenue structure in accordance with the services. Transparency in billing system: Mobile VAS market faces issues of transparency in billing and payment system. This leads to conflict among the stakeholders about the revenue share. There is a need for a central authority to monitor the IT system and bring transparency to the whole billing system. Limited availability of local content: Growth of MVAS market in India is hampered by lack of localization of the content. Lack of local content restrains the growth of MVAS market in regional areas, which has a great potential. This requires investment from the content providers. The stakeholders are unsure about the return on investment, therefore, are concentrating only on mass market services. The stakeholders need to produce more local content and work in tandem to ensure that the consumers are made aware of the value of these services.
Challenge for operators is that they can market on a big scale only limited things there are so many services and lot of services fall by the wayside as they do not get marketing dollars behind themTechnology enabler
Pull based mobile marketing: In this, the users can access content by simply sending an SMS or calling a number. For example, such mobile marketing is adopted by Pepsi, Kwality Walls etc. the users are allowed to access the content available with the service providers.
Wireless Internet Protocol: WAP is the usage of internet on mobile for mobile banking applications. It is similar to internet banking. The consumers handset needs to be WAP enabled. WAP banking is open to similar threats as internet banking. J2ME: J2ME has dual advantage. One, it can use GPRS, USSD or SMS to carry the consumer data/ instruction in an encrypted format. Second, it can be operator agnostic. J2ME applications are secure since the application resides on the handset. SIM Application Tool Kit (STK): The SIM Application Toolkit allows for the service provider or bank to house the consumers mobile banking menu within the SIM card. STK has been deployed by many mobile operators around the world for many applications, where a menu-based approach is required, such as mobile banking and content browsing. STK is the most secure method of mobile banking. It allows the bank to load its own encryption keys onto the SIM card with the banks own developed application. Thus the consumers data can be stored on the SIM Card and the consumer can be authenticated on the handset prior to having to carry any data across the mobile network. The industry is optimistic about the usage of STK application for mobile banking.
The current MVAS market contribution of each of the above services is given belowVAS Revenue contribution- by Services- Dec 2006
Game & Data P2A & A2P 7% 15% Others 3%
P2A/A2P S MS 16%
P2P 40%
Games 5%
CRBT/RT 40%
P2P S MS 37%
CRBT/RT 35%
The current MVAS market (as of June 2008) is Rs 5780 crores. P2P SMS contributes Rs 2140 crores to the MVAS market and this goes only to the operators (the balance Rs 3640 crores is divided between the different stakeholders including the operators.). Rs 2312 comes from CRBT/RT while the balance Rs 1329 crores is divided amongst the other services.
The MVAS market registered a y-o-y growth of 60% 06-07. The MVAS market is expected to grow steadily at a rate of almost 70% for the next two years. By end June 2009 the VAS market is expected to stand at Rs 9,760 crore and by end June 2010 at Rs 16,520 crore. MVAS currently contributes around 9 % to the operators revenue. It is expected to increase to 10.4 % in the next 1 year and 12% by June 2010.
Number portability is expected to have an interesting impact on the MVAS industry. Currently, MVAS services are not a key decision making parameter while purchasing the mobile phone connection. Therefore, with the introduction of number portability, operators are expected to focus their energy and investment in providing better voice services. But once the voice services (network, billing, etc.) cease to become a differentiating factor, the operators will focus more on MVAS to differentiate themselves and hold on to their customers. This is expected to give a boost to the MVAS industry.
About eTechnologyGroup@IMRB
The eTechnology Group@IMRB has been active in the area of Office Automation; Telecommunications, IT, media and Convergence related markets for over a decade now. The group has been actively analyzing some of the technologies/markets like: Telecommunications: Basic & Cellular phone services, Video conferencing Voicemail, VPNs, WAP devices & services, Mobile VAS Usage and Attitude, Web 800, Televoting, Voice Portal Services, Mobile Banking/ Remittance/ Advertising IT: PCs, servers, printers, mouse/keyboards, software, hardware/software management, Internet services, e-commerce, Status on Y2K, Language software etc. channel
Media/convergence: DTH, Marketing of media time slots by niche channels, Cable channel opportunity for advertising & usage of DVD technology, Opportunity for Edutainment and distance learning services, potential for Tele-medicine application etc.
The Group has experience in conducting various client based commissioned and syndicated market research studies over these years
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DELHI Deepak Halan eTechnology Group@IMRB IMRB International 8, Balaji Estate, Kalkaji New Delhi - 110019. Tel : (91)-11-42697906 Fax: (91)-11-42687801 / 02 Email: deepak halan@imrbint com BANGALORE MUMBAI Balendu Shrivastava
B Wing, Mhatre Pen Building Senapati Bapat Marg, Mumbai Tel : (91)-22-24323500 Fax: (91)-22-24323900 Email: balendu shrivastava@imrbint com CHENNAI
Rajesh Kurup
Rathina Kumar
7, Devatha Plaza 131, Residency Road Bangalore - 560025 Tel : (91)-80-2213186, 2274388, 2274236 Fax: (91)-80-22473486 Email: rajesh.kurup@imrbint.com Analysts for this report: Deepak Halan: Amit Sharma: Jaya Vasisht: Smita Mathur:
Chennai - 600008 Tel : (91)-44-4222 0801 Fax: (91)-44-4222 0900 Email: rathina.kumar@ imrbint.com
Published By: Dr Subho Ray, President, on behalf of Internet and Mobile Association of India, 406 Ready Money Terrace, 167, Dr Annie Beasant Road, Worli, Mumbai 400018